AMC Technology, L.L.C. v. Cisco Systems, Inc., No. 5:2011cv03403 - Document 169 (N.D. Cal. 2013)

Court Description: ORDER GRANTING-IN-PART CISCO'S MOTION FOR SUMMARY JUDGMENT AND DENYING AMC'S MOTION FOR SUMMARY JUDGMENT by Judge Paul S. Grewal granting in part and denying in part 103 Motion for Summary Judgment; denying 110 Motion for Summary Judgment (psglc1, COURT STAFF) (Filed on 7/11/2013)

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AMC Technology, L.L.C. v. Cisco Systems, Inc. Doc. 169 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION United States District Court For the Northern District of California 10 11 AMC TECHNOLOGY, LLC, Plaintiff, 12 13 ) ) ) ) ) ) ) ) ) ) v. CISCO SYSTEMS, INC., 14 Defendant. 15 16 17 18 Case No.: 11-cv-3403 PSG ORDER GRANTING-IN-PART CISCO’S MOTION FOR SUMMARY JUDGMENT AND DENYING AMC’S MOTION FOR SUMMARY JUDGMENT (Re: Docket Nos. 103, 110) In this commercial dispute, Defendant Cisco Systems, Inc. (“Cisco”) moves for summary judgment.1 Plaintiff AMC Technology, LLC (“AMC”) opposes, and has filed a summary judgment motion of its own, on both its affirmative claims and Cisco’s counterclaims.2 Having 19 20 21 considered the papers and oral arguments of counsel, the court GRANTS-IN-PART Cisco’s motion for summary judgment and DENIES AMC’s motion for summary judgment. I. 22 23 BACKGROUND Cisco develops and sells software to customer contact centers so that they can receive, 24 process, and route customer phone calls, texts, and other communications. These products include 25 Unified Contact Center Express (“UCCX”), which is marketed to small businesses, and Unified 26 1 See Docket No. 103. 2 See Docket No. 110. 27 28 1 Case No.: 11-3403 PSG ORDER Dockets.Justia.com 1 Contact Center Enterprise (“UCCE”), which is marketed to larger businesses. Businesses that 2 purchase these products often also use customer relationship management (“CRM”) database 3 software, typically developed by other companies such as Microsoft, Oracle, and Salesforce. To 4 integrate Cisco’s software with third-party CRM software, Cisco’s customers need additional 5 connector or adapter software. AMC develops and licenses these connectors and adapters. 6 A. Cisco and AMC Agree to a Deal 7 In 2007, Cisco and AMC entered into a software development and licensing agreement 8 9 (“Agreement”) whereby AMC agreed to modify a number of its existing connector or adapter United States District Court For the Northern District of California 10 software products according to Cisco’s specifications, and Cisco agreed to license both modified 11 software and standard software.3 The purpose was to resell the adapted products under the Cisco 12 brand.4 13 14 The Agreement refers to the AMC software products to be modified as “Deliverables,”5 that are described pursuant to a “Statement of Work.”6 The first Statement of Work is attached as 15 16 17 Exhibit A to the Agreement and lists specific products to be developed,7 resources to be provided by Cisco,8 content requirements for the Deliverables,9 and a delivery schedule for the 18 Deliverables.10 The contract also contemplates future Statements of Work, which would add 19 Deliverables to the relationship: 20 21 3 See Docket No. 111, Ex. 14. 22 4 See id. 23 5 See id. § 1.6. 24 6 See id. § 1.22. 25 7 See id., Ex. A § 2. 26 8 See id. § 3. 27 9 See id. § 5.1.1. 28 10 See id. § 5.1.2. 2 Case No.: 11-3403 PSG ORDER Additional Statements of Work. If Cisco desires to engage Licensor for additional services which are not included in the Statement of Work and which do not constitute merely a revision or modification of the Statement of Work, the parties shall in good faith negotiate additional Statement of Work, each of which upon signing shall be deemed a part of this Agreement. Additional Statements of Work shall be entered into by mutual agreement between Cisco and Licensor and shall be substantially in the form of the Statement of Work attached hereto. Each Statement of Work shall be signed by authorized representatives of the parties. This Agreement may cover more than one Statement of Work at any given time.11 1 2 3 4 5 6 The Agreement also specifies the process for delivery and rejection or acceptance of any 7 8 9 Deliverable. The way it was supposed to work is this. AMC develops the Deliverable according to a specification and delivers it according to the schedule provided in the Statement of Work.12 United States District Court For the Northern District of California 10 Cisco then reviews the Deliverable and within 15 days provides written notice of its acceptance or 11 rejection.13 If Cisco rejects the Deliverable, Cisco must provide written notice describing the 12 deficiencies not conforming to the Agreement specifications in “sufficient detail” for AMC to 13 correct them.14 AMC in turn corrects such deficiencies within 30 days, provided that AMC is not 14 delayed by “conditions outside its reasonable control.”15 This feedback loop is to continue at least 15 16 two more times, at which point Cisco is free to issue a final rejection.16 If Cisco issues a final 17 rejection of the Deliverable, AMC is to return any and all compensation already paid by Cisco for 18 that Deliverable and the Statement of Work terminates.17 Cisco then has the option to terminate 19 the Agreement with written notice.18 20 21 11 See id. § 3.11. 22 12 See id., Ex. B and Ex. A § 5.1.1. 23 13 See id. § 3.2. 24 14 Id. 25 15 Id. 26 16 See id. 27 17 See id. 28 18 See id. 3 Case No.: 11-3403 PSG ORDER As things turned out, AMC successfully developed a number of Deliverables under the 1 2 Agreement, which were accepted by Cisco and sold without issue. The parties have quarreled, 3 however, over two products – the “Siebel Adapter” and the “UCCX Connector” – giving rise to the 4 current suit. 5 B. 6 AMC Develops the Siebel Adapter The first Statement of Work called for AMC to develop the Siebel Adapter.19 Originally, 7 8 9 the Statement of Work called for the Siebel Adapter work to be completed in two phases, the first ending on September 14, 2007 and the second on October 31, 2007.20 The parties later agreed to United States District Court For the Northern District of California 10 an amended development schedule, with delivery of the functional specification by October 29, 11 2007, delivery of test plan and results by October 31, 2007, delivery of software on a gold CD by 12 November 2, 2007, and final testing of the software at Cisco’s lab in Boxborough, Massachusetts 13 during the week of November 5, 2007.21 14 On October 26, 2007, AMC sent an email to Cisco purporting to delivery the functional 15 16 specification.22 On October 29, 2007, Cisco responded by inquiring whether AMC had sent the 17 wrong document because the purported functional specification appeared to it to be nothing more 18 than a feature summary.23 AMC confirmed that it provided the correct document.24 On October 19 30, 2007, AMC sent the test plans, supplementing them on November 2, 2007.25 During the week 20 21 19 See id., Ex. A § 5.1.1. 20 See id. § 5.1.2. 21 See id., Ex. 7. 22 See id., Ex. 8. 23 See Docket No. 104, Ex. 9. 24 See id. 25 See Docket No. 111, Ex. 17-19. 22 23 24 25 26 27 28 4 Case No.: 11-3403 PSG ORDER 1 of November 5, 2007, AMC sent its engineers to test the software.26 Cisco was dissatisfied with 2 the shipment and on November 12, 2007 sent AMC a report identifying a list of issues for AMC to 3 address.27 Two days later, AMC responded, saying it had fixed 21 of the issues and was working 4 on the rest.28 On November 19, 2007, Cisco informed AMC that Cisco was discussing the Siebel 5 Adapter internally and that it was “leaning” towards conducting an audit of AMC’s testing and lab 6 resources.29 Cisco recommended that AMC “continue to solidify the Siebel [A]dapter with a goal 7 of being able to present a product that has extended testing and a high pass rate.”30 On November 8 9 30, 2007, AMC informed Cisco that of the 55 issues identified by Cisco, all but six were either United States District Court For the Northern District of California 10 duplicates, non-issues, “potential upgrades,” or were resolved.31 The remaining six included one 11 error yet to be fixed, one error that AMC needed to test on Cisco systems to fix, and four errors that 12 required Cisco input.32 Cisco did not respond to AMC’s email. 13 14 15 16 17 Internally, on or around November 14, 2007, Cisco decided to “Re-Execute Commit” (“ReEC”) to the Siebel Adapter project and completely “revisit requirements, functional spec, gap analysis” of the project.33 Re-EC is an internal Cisco process that essentially halts all work on the project and turns resources elsewhere.34 Cisco then reevaluates the project, its requirements, and a 18 19 20 26 See id., Ex. 20. 21 27 See id., Ex. 21. 22 28 See id., Ex. 22. 23 29 See Docket No. 104, Ex. 15. 24 30 See id. 25 31 See Docket No. 111, Ex. 29. 26 32 See id. 27 33 See id., Ex. 24. 28 34 See id., Ex. 1 at 183:17-184:11. 5 Case No.: 11-3403 PSG ORDER 1 2 potential new schedule for completion of the project.35 Cisco later communicated this intent to AMC.36 3 Cisco never completed the Re-EC process.37 At a meeting in March 2008, Cisco 4 determined that no resources were available for the AMC Siebel Adapter project.38 AMC asked 5 Cisco several times over the course of the next year or so whether the project would proceed, but 6 Cisco explained it did not have enough resources.39 The project was never revived. 7 8 C. The UCCX Connector Languishes The UCCX Connector was not in the Summary of Development in the first Statement of 9 United States District Court For the Northern District of California 10 Work.40 In original drafts, the UCCX Connector was included, but it was taken out by AMC’s 11 lawyer during contract negotiations.41 Some references to “UCCX” and “CCE/CCX” remained, 12 however, in other parts of the Agreement and the Statement of Work, including the royalty 13 14 payments schedule, a list of both standard and developed software to be licensed, and criteria for functional testing.42 Although AMC asked for updates on the UCCX Connector project, Cisco 15 16 stated it did not have the resources to pursue the project and it never went forward.43 17 18 19 35 Id., Ex. 5 at 79:23-80:7. 36 See id., Ex. 25. 37 See, e.g, id. at 81-82. 38 See id., Ex. 37. 39 See id., Ex. 5 at 279:24-280:21. 40 See id., Ex. 14, Ex. A § 1.1. 41 See Docket No. 104, Ex. 31. 42 See Docket No. 111, Ex. 14, Ex A § 1.1, 3.1, 5.1.12. 43 See id., Ex. 5 at 279:24-280:21; Ex. 38. 20 21 22 23 24 25 26 27 28 6 Case No.: 11-3403 PSG ORDER 1 D. Litigation Looms and Then Commences 2 On August 2, 2011, AMC sent Cisco notice of AMC’s intent to terminate the Agreement 3 “due to Cisco’s material violations” of the contract.44 Among other issues, the letter alleges that 4 Cisco breached the contract with respect to both the Siebel Adapter and UCCX Connector.45 On 5 September 6, 2011, AMC sent a letter to Cisco terminating the Agreement.46 6 7 8 9 On October 3, 2011, AMC filed a first amended complaint (“FAC”) alleging ten claims.47 After the court granted-in-part Cisco’s motion to dismiss the FAC and the parties stipulated to dismissal of certain claims, all that remains of the FAC are AMC’s claims for breach of contract United States District Court For the Northern District of California 10 and breach of the covenant of good faith and fair dealing regarding the Siebel Adapter and the 11 UCCX Connector.48 Cisco filed counterclaims for breach of contract and breach of the covenant of 12 good faith and fair dealing.49 13 II. 14 15 16 LEGAL STANDARDS Summary judgment is appropriate only if there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”50 There are two distinct steps to a 17 motion for summary judgment. The moving party bears the initial burden of production by 18 identifying those portions of the pleadings, discovery and affidavits which demonstrate the absence 19 of a triable issue of material fact.51 Where the moving party has the burden of proof at trial, he 20 44 Id., Ex. 54. 45 See id. 46 See Docket No. 104, Ex. 40. 47 See Docket No. 34. 48 See Docket No. 64. 49 See Docket No. 77. 50 Fed. R. Civ. P. 56(a). 51 See Fed. R. Civ. P. 56(c)(1); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 21 22 23 24 25 26 27 28 7 Case No.: 11-3403 PSG ORDER 1 must “affirmatively demonstrate that no reasonable trier of fact could find other than for the 2 moving party.”52 If the moving party does not bear the burden of proof at trial, however, he may 3 satisfy his burden of proof either by proffering “affirmative evidence negating an element of the 4 non-moving party’s claim,” or by showing the non-moving party has insufficient evidence to 5 establish an “essential element of the non-moving party’s claim.”53 If the moving party meets its 6 7 8 9 United States District Court For the Northern District of California 10 initial burden, the burden of production then shifts to the non-moving party, who must then provide specific facts showing a genuine issue of material fact for trial.54 A material fact is one that might affect the outcome of the suit under the governing law.55 A dispute is “genuine” if the evidence is such that reasonable minds could differ and find for either party.56 11 At this stage, the court does not weigh conflicting evidence or make credibility 12 determinations.57 Thus, in reviewing the record, the court must construe the evidence and the 13 14 inferences to be drawn from the underlying evidence in the light most favorable to the non-moving party.58 15 16 17 18 19 20 21 22 23 52 Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). 53 Celotex, 477 U.S. at 331. See id. at 330; T.W. Elec. Service, Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 630, 630 (9th Cir. 1987). 54 24 55 See Anderson, 477 U.S. at 248. 25 56 See Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 (9th Cir. 1987). 26 57 T.W. Elec. Serv., Inc., 809 F.2d at 630. 27 58 28 See Anderson, 477 U.S. at 248; Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 8 Case No.: 11-3403 PSG ORDER III. 1 2 A. DISCUSSION AMC’s Breach of Contract Claims 3 1. Siebel Adapter 4 As the party with the burden of proof at trial, to secure summary judgment on its breach of 5 contract claims regarding the Siebel Adapter, AMC must prove “affirmatively demonstrate that no 6 reasonable trier of fact could find other than” in its favor on every element of this claim.59 Cisco 7 8 9 not only opposes the motion, but further urges that summary judgment should be granted in its favor because AMC has insufficient evidence to establish at trial at least one essential element of United States District Court For the Northern District of California 10 its claim.60 Given these dueling motions on the Siebel Adapter breach claim, the question before 11 the court is simple – construing the evidence in favor of each party, could a reasonable jury to find 12 in favor of that party? Because court finds that the answer is yes, neither party is entitled to 13 summary judgment. 14 Here’s why. At its heart, AMC’s breach of contract claim on the Siebel Adapter alleges 15 16 that Cisco failed to properly engage in the accept-or-reject process for this Deliverable. To prove 17 breach of contract, a plaintiff must demonstrate (1) the existence of a contract, (2) plaintiff’s 18 performance, or excuse for nonperformance, and (3) the defendant’s breach.61 19 20 21 AMC and Cisco both agree that the Siebel Adapter was a Deliverable under the Agreement, meaning the terms of the Agreement governed each party’s duties regarding the Siebel Adapter. Where they disagree is whether AMC performed under the contract, or was excused from 22 performing, and whether Cisco breached the contract by failing to perform. 23 24 25 59 Soremekun, 509 F.3d at 984. 60 Celotex, 477 U.S. at 331. 61 See Hamilton v. Greenwich Investors XXVI LLC, 195 Cal.App.4th 1602, 1614 (2011). 26 27 28 9 Case No.: 11-3403 PSG ORDER Before delving into the particular facts surrounding the Siebel Adapter delivery, a review of 1 2 the relevant terms of the Agreement is warranted. The Statement of Work attached to the 3 Agreement requires more than just software. Instead, each Deliverable be comprised of the 4 following: 5 (1) “Modifications to Licensor’s Multi-Channel Integration Suite to ensure such Software complies with the Specifications” (i.e. the software itself), (2) “Certifications of the Software from all CRM vendors that provide a formal certification program. Copies of the certificates shall be delivered to Cisco” (“third-party certification”), (3) “Functional Specifications and other documentation as set out in the Agreement and Exhibits thereto, including but not limited to: product description, design guide, installation guide, configuration and administration guide, and trouble shooting guide” (the “functional specifications”), and (4) “[S]uch testing and quality assurance of the Software as agreed in writing with Cisco or as reasonably requested by Cisco” (“testing results”).62 6 7 8 9 United States District Court For the Northern District of California 10 11 12 a. 13 14 First Delivery AMC asserts it delivered the Siebel Adapter according to its obligations under the contract. On November 5, 2007, AMC delivered the modified Siebel Adapter software to Cisco.63 On 15 16 17 October 26, 2007, AMC delivered what it contends were the functional specifications.64 On October 30, 2007, AMC delivered test results.65 On November 2, 2007, AMC delivered additional 18 user documentation.66 Although AMC did not deliver the third-party certification, which in this 19 case would be provided by Oracle, AMC claims that Oracle could not issue the third-party 20 certification until Cisco had finally approved the software.67 21 22 62 See Docket No. 111, Ex. 14 § 5.1.1. 63 See id., Ex. 8 at 54:25-55:18. 64 See id., Ex. 15; Ex. 4 at 54:25-55:5. 65 See id., Ex. 17. 66 See id., Ex. 18, 19. 67 See id. at 12. 23 24 25 26 27 28 10 Case No.: 11-3403 PSG ORDER The court must comment that Cisco appears to take conflicting positions as to whether 1 2 AMC indeed achieved delivery as required by the contract. While in its own motion for summary 3 judgment, Cisco does not dispute that AMC delivered at least the Siebel Adapter itself,68 Cisco 4 argues in opposition to AMC’s motion that AMC’s delivery nevertheless was inadequate.69 In any 5 6 7 8 9 event, what AMC ignores is that its delivery obligation was for a Deliverable, not just the software piece of that Deliverable. As a result, the missing third-party Oracle certification alone is sufficient issue to deny AMC’s summary judgment motion on this claim. Substantial performance occurs when there was “no willful departure from the terms of the contract, and no omission of any of its United States District Court For the Northern District of California 10 essential parts.” 70 While Cisco did not object to that omission at the time of receipt, a reasonable 11 jury could conclude that the Oracle certification was an essential part of the delivery obligation 12 such that without the certification, the delivery did not constitute substantial performance.71 Under 13 such circumstances, summary judgment to AMC on this issue is not justified. 14 b. 15 Rejection and Redelivery Cisco is not fortunate, however, as to the remaining aspects of AMC’s performance, such 16 17 that it should prevail on its own motion. First, while it is undisputed that Cisco sent an error list of 18 55 issues with the Siebel Adapter software for AMC to resolve,72 it is very much disputed whether 19 Cisco provided “sufficient detail” in its list of the nonconformance to the specifications to allow 20 21 22 23 24 68 See Docket No. 103 at 17. Cisco’s 30(b)(6) witness also agreed as much. See Docket No. 111, Ex. 8 at 53:25-54:18. 69 See Docket No. 128 at 10-11. 70 In re Kinney Aluminum Co. 78. F.Supp. 565, 567-68 (S.D. Cal. 1948). 71 See id. 72 See Docket No. 111, Ex. 21. 25 26 27 28 11 Case No.: 11-3403 PSG ORDER 1 2 AMC to correct the problem.73 The sufficiency of the detail of Cisco’s list to allow AMC to fix problems is an open question that a reasonable jury could decide in AMC’s favor. AMC might also persuade a reasonable jury as to whether AMC redelivered the Siebel 3 4 Adapter. AMC claims that although it did not physically redeliver the Siebel Adapter, the 5 doctrines of tender, prevention, and futility excused AMC’s nonperformance and triggered Cisco’s 6 duty to perform. 7 First, AMC contends that its communications to Cisco on November 29 and 30, 2007 8 9 constituted a tender of redelivery to Cisco. Tender, or an offer for full performance, extinguishes United States District Court For the Northern District of California 10 the tendering party’s obligation to perform and triggers the other party’s duty to perform.74 It must 11 be made with the intent to extinguish the obligation.75 To be operative, the offer must be made in 12 good faith, unconditional, and the party must be willing and able to perform.76 On November 29, 13 2007, AMC’s representative Anthony Uliano (“Uliano”) called Cisco employees Richard Jefts 14 (“Jefts”) and Mike Bergelson (“Bergelson”) to inform Cisco of the status of the Siebel Adapter.77 15 16 17 18 According to Uliano, he explained that of the six issues yet unresolved by AMC, four required some kind of input from Cisco, and two others could be easily fixed.78 On November 30, 2007, Uliano emailed Jefts and Bergelson providing much of the same information – the email purported 19 20 21 22 73 See id., Ex. 14 § 3.2. 23 74 See Cal. Civ. Code §§ 1485, 1486. 24 75 See id. 25 76 26 See Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 580 (1984); See also Cal. Civ. Code §§ 1493-95. 77 See Docket No. 110-1 ¶¶ 4-5. 78 See id. 27 28 12 Case No.: 11-3403 PSG ORDER 1 2 to deliver “the latest on the Siebel Adapter,” with a list of current issues showing six issues remained to be fixed.79 Accordingly, there is a question as to whether AMC’s offer constituted tender. While Cisco 3 4 5 6 is quite right that a jury might question AMC’s willingness and ability to fully perform if only Cisco would consent, it should be left to the jury to weigh the evidence and determine what was said in that phone conversation, and whether AMC’s message was sufficient to effect tender. 7 Second, AMC argues that even if its performance was not enough to constitute tender, 8 9 AMC’s performance was excused because Cisco prevented it. “[W]here one contracting party United States District Court For the Northern District of California 10 prevents the other’s performance of a condition precedent, the party burdened by the condition is 11 excused from performing it, and the benefited party’s duty of performance becomes 12 unconditional.”80 AMC argues that Cisco prevented AMC’s performance by initiating the Re-EC 13 process on the Siebel Adapter project. The Re-EC decision sent the project “back to the drawing 14 board,” freezing the project and redistributing committed resources until Cisco re-evaluated the 15 16 project.81 After Cisco made the Re-EC decision, Cisco no longer had any engineers or resources 17 dedicated to working with AMC on the Siebel Adapter project. Cisco also never responded to 18 AMC’s November 14 status report, nor provided the information AMC claims was necessary to 19 complete the revisions. A reasonable factfinder might conclude that, all of this evidence 20 notwithstanding, in light of the Agreement’s purpose, which Cisco argues was to allow Cisco to 21 22 hire out development of adapters with minimal commitment of internal resources, Cisco did not prevent AMC’s redelivery. But it might not. Once again, such disputes are best left to the jury to 23 24 resolve. 25 79 26 80 27 City of Hollister v. Monterey Ins. Co., 165 Cal. App. 4th 455, 490 (2008). See also Cal Civ. Code § 1511. 81 28 Docket No. 112, Ex. 29. See Docket No. 111, Ex. 5 at 79:23-80:7; Ex. 24; Ex. 8 at 89:5-11. 13 Case No.: 11-3403 PSG ORDER Third, AMC argues that delivery would have been futile because Cisco had already decided 1 2 to Re-EC the Siebel Adapter project. Acts are futile where the defendant has expressly refused to 3 accept performance, the defendant indicates through conduct that it will not accept performance, or 4 performance would otherwise be pointless.82 A reasonable jury could find that in light of Cisco’s 5 decision to Re-EC the Siebel Adapter, Cisco would not have accepted redelivery of the product. 6 In sum, the issue of whether either party breached the Agreement with respect to the Siebel 7 8 Adapter must be presented to a jury. 2. 9 The court next turns to AMC’s claim that Cisco breached the Agreement by refusing to 10 United States District Court For the Northern District of California UCCX Connector 11 accept the UCCX Connector. This claim turns on whether the UCCX Connector was a Deliverable 12 under the Agreement.83 13 14 15 16 17 Under California law, contract interpretation is a two-step process: first, the court looks to see if there is any “ambiguity” in the contract, or whether the language is “reasonably susceptible to the interpretation urged by a party.”84 Only in the event that there is an ambiguity does the court proceed to consider the extrinsic evidence in interpreting the contract.85 Although other products and standard software were licensed by the parties and included in 18 19 the royalty payments section, the contract clearly only subjects Deliverables to the development 20 and delivery schedule and the accept-or-reject process.86 Under the plain terms of the Agreement, 21 22 82 23 See Gross v. Raeburn, 219 Cal. App. 2d 792, 807 (1963), Sutherland v. Barclays American/Mortgage Corp., 53 Cal. App. 4th 299, 312-13 (1997); Garcia v. World Savings, FSB, 183 Cal. App. 4th 1031, 1042-43 (2010). 24 83 25 84 26 See Docket No. 64 at 9. In re Facebook DPC Advertising Litigation, 709 F.Supp.2d 762, 769 (N.D. Cal. 2010) (citing Wolf v. Superior Court, 114 Cal. App. 4th 1343, 1351 (2004)). 85 27 See id. See Docket No. 111, Ex. 14 § 3.2 (“Acceptance: Upon delivery of the Deliverables…”); Ex. A (“Deliverables; Delivery Dates”). 86 28 14 Case No.: 11-3403 PSG ORDER 1 then, AMC’s duty to develop and deliver and Cisco’s corresponding duty to accept or reject arises 2 only where an item is designated a Deliverable. Thus, even if Cisco licensed the UCCX Connector 3 software,87 an obligation to further accept an adapted version of that software does not exist unless 4 the UCCX Connector is properly characterized as a “Deliverable.” 5 6 As already discussed, Deliverables are by definition only those projects listed in any Statements of Work expressly executed by the parties.88 The Statement of Work contains the 7 8 following summary of products to be developed: Summary of Development. Licensor agrees to modify Licensor’s Multi-Channel Integration Suite to interconnect Cisco Unified Contact Center, Enterprise and Hosted as well as ICM Enterprise and Hosted with the following CRM software: Siebel SAP CRM Microsoft Outlook Microsoft CRM PeopleSoft Salesforce.com89 9 United States District Court For the Northern District of California 10 11 12 13 14 15 This summary of products to be modified plainly does not include “UCCX” or “Unified Contact 16 Center Express.” 17 AMC argues that the UCCX Connector was nevertheless a Deliverable under the 18 19 Agreement. AMC submits that there are other references to the UCCX Connector in the Statement 20 of Work, raising at least a triable inference that the UCCX Connector was intended to be a 21 Deliverable. However, the references identified by AMC are scattered and abstract at best. In 22 “Acceptance Testing and Acceptance Criteria,” the Agreement provides that “Software 23 interoperability testing will consist of testing the Software in an environment which consists of a 24 25 26 87 The UCCX Connector appears in the Agreement under a list of standard and developed software to be licensed by Cisco. See Docket No. 111, Ex. 14, Ex. A. See also Docket No. 104, Ex. 3, 4. 88 See Docket No. 111, Ex. 14 § 1.6. 89 Id., Ex. A § 2. 27 28 15 Case No.: 11-3403 PSG ORDER 1 live CCX and CCE system.”90 AMC argues that this is another name for the Unified Contact 2 Center Express. Even if that were true, these statements reference operation testing conditions and 3 criteria rather than indicate any intent to treat the UCCX Connector as a product to be adapted by 4 AMC and licensed to Cisco. 91 The legal maxim “expressio unius est exclusio alterius” applies 5 here – where a list of Deliverables is explicitly provided, it strains credibility to contend that 6 7 abstract references to a product elsewhere in the contract can create ambiguity as to whether it is also a Deliverable.92 8 The extrinsic evidence does not create any ambiguity in this plain interpretation, but 9 United States District Court For the Northern District of California 10 supports it. During negotiation, Cisco and AMC discussed including both UCCE and UCCX 11 Connectors in the contract.93 An earlier draft included both UCCE and UCCX Connectors.94 12 However, Cisco wanted to focus on the UCCE first because of greater demand on that side of the 13 business and asked AMC to remove the UCCX project.95 The parties agreed to remove the UCCX 14 15 16 17 Connector from the first phase in order to focus on other projects. AMC’s President Uliano sent an email to Cisco about the first draft, stating: “Also, I thought Express wasn’t going to happen in this phase, so we should probably remove it.”96 Accordingly, AMC’s lawyers made the revision 18 90 19 Id. § 5.1.1. See Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 18 (1995) (“language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. Courts will not strain to create an ambiguity where none exists.”). 91 20 21 92 24 Black v. Richfield Oil Corp., 41 F. Supp. 988, 995 (S.D. Cal. 1941) aff'd 146 F.2d 801 (9th Cir. 1944). See also Cal. Civ. Code § 3534 (“Particular expressions qualify those which are general”); Scudder v. Perce, 159 Cal. 429, 433, 114 P. 571, 573 (1911) (“the familiar rule [is] that when general and specific provisions of a contract deal with the same subject-matter, the specific provisions, if inconsistent with the general provisions, are of controlling force”). 25 93 See Docket No. 104, Ex. 36 at 37:15-39:12. 26 94 See id., Ex. 30. 27 95 See Docket No. 104, Ex. 36 at 37:15-39:12. 28 96 Id., Ex. 30. 22 23 16 Case No.: 11-3403 PSG ORDER 1 editing the term “Unified Contact Center Express, Enterprise” in the “Summary of Development” 2 to read only “Unified Contact Center, Enterprise.”97 As AMC admits, they made this change 3 because although Cisco wanted the UCCX Connector, it “did not want it immediately.”98 AMC 4 agrees that the UCCX Connector was “Phase 2” of the project,99 which implies they knew that the 5 UCCX Connector was not part of any current Statement of Work. 6 7 8 9 AMC alternatively contends that post-contract communications “modified” the Statement of Work to include the UCCX Connector as a Deliverable. Section 3.11 provides that “If Cisco desires to engage Licensor for additional services which are not included in the Statement of Work United States District Court For the Northern District of California 10 and which do not constitute merely a revision or modification of the Statement of Work, the parties 11 shall in good faith negotiation additional Statements of Work,” which must be in writing and 12 signed by party representatives by both sides.100 AMC points to an email chain between the two 13 14 15 16 parties as such a revision. As with any contract, a modification requires mutual assent between the parties, as evidenced by a “reasonable meaning of the words and acts of the parties, and not from their unexpressed intentions or understanding.”101 The email chain shows that Cisco employee 17 Willem Nijenhuis (“Nijenhuis”) stated, “We are going to move ahead with the Connector project 18 for CCX now.”102 In response, AMC’s representative Uliano asked, “Will we start on that phase 19 after this one, or do you want us to try to get it done with this one?” apparently in reference to the 20 21 22 97 See id.; See also id. Ex. 31, Ex. 27. 98 See Docket No. 134 at 22. 99 Docket No. 136, Ex. 3. 23 24 25 100 26 See id., § 3.11. 101 27 1 Witkin, Summary of Cal. Law (10th Ed. 2005) Contracts, § 116; § 964. See also Cal. Civ. Code §§ 1550, 1565. 28 102 Docket No. 136, Ex. 2. 17 Case No.: 11-3403 PSG ORDER 1 UCCE and UCCX Connectors.103 Nijenhuis then responded, “That’s one of the many questions we 2 need to answer. It’s probably too[] late to really let in run parallel with the CEE one, but I’d like to 3 have it follow as close as possible.”104 Lastly, Uliano responded “I think with all the work we’re 4 doing, we should be able to immediately move on to the IPCC-X phase. I’ll talk to the team and 5 get back to you.”105 There is no evidence in this email exchange that can be construed as mutual 6 7 8 9 assent, either to create a modification in the current list of Deliverables or to add another Statement of Work to include the UCCX Connector as a Deliverable. Uliano even explicitly says “I’ll… get back to you,” rather than words of assent, even on AMC’s part. With no offer, acceptance, and United States District Court For the Northern District of California 10 mutual assent that Cisco can point to, there can be no modification or Statement of Work 11 establishing the UCCX Connector as a Deliverable.106 12 13 14 Even if the UCCX Connector were somehow construed to be an Agreement Deliverable, AMC cannot prove that it delivered all of the components required to trigger Cisco’s corresponding duties under the contract. AMC contends that it delivered a CD containing both the UCCE and 15 16 17 UCCX Connectors. But as noted previously, delivery requires not only delivery of the software, but also specifications, test results, and third-party certification. AMC cannot establish that it 18 completed those steps, meaning it never completed delivery and Cisco had no obligation to accept 19 or reject. Under the facts presented, even viewing the evidence in the light most favorable to 20 AMC, no reasonable jury could conclude that Cisco breached an express term of the contract by 21 22 failing to accept the UCCX Connector. For these reasons, summary judgment in favor of Cisco must be granted on AMC’s breach of contract claim with respect to the UCCX Connector. 23 24 103 Id. 25 104 Id. 26 105 Id. 27 106 28 See American Bldg. Maintenance Co. v. Indem. Ins. Co. of North America, 214 Cal. 608, 615 (1932). 18 Case No.: 11-3403 PSG ORDER 1 AMC’s Breach of Implied Covenant of Good Faith and Fair Dealing Claims B. AMC brings four claims against Cisco for breach of the implied covenant of good faith and 2 3 fair dealing. Both AMC and Cisco seek summary judgment on these claims, again raising the 4 question of whether a reasonable jury could decide in either party’s favor. The implied covenant 5 “imposes upon each party a duty of good faith and fair dealing in its performance and its 6 enforcement.”107 The implied covenant “is aimed at making effective the agreement's 7 8 9 promises.”108 A plaintiff can show this by demonstrating “a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but United States District Court For the Northern District of California 10 rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and 11 disappoints the reasonable expectations of the other party thereby depriving that party of the 12 benefits of the agreement.”109 13 1. Failing to provide customers with AMC’s maintenance releases and updates 14 The court previously dismissed this claim with leave to amend, finding that Section 3.7 of 15 16 the Agreement does not provide for any obligation for Cisco to distribute AMC’s maintenance 17 releases and updates. The Agreement merely requires AMC to provide Cisco with maintenance 18 releases and updates, but does not say why.110 AMC argues that while there is no express 19 obligation for Cisco to distribute releases and updates to customers, Cisco had an implied 20 obligation to do so. But AMC does not provide any evidence supporting this skeletal theory. 21 AMC states only that Cisco’s failure to distribute AMC releases “caused customers to complain to 22 23 24 Foley v. Interactive Data Corp., 47 Cal. 3d 654, 683 (1988). 108 Id. 109 Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395 (Ct. App. 1990). 110 25 107 See Docket No. 111, Ex. 14 § 2.2. 26 27 28 19 Case No.: 11-3403 PSG ORDER 1 AMC about software problems.”111 While surely an inconvenient result for AMC, AMC has 2 provided no evidence as to why a failure to distribute updates to customers unfairly frustrates the 3 reasonable expectations under the agreement.112 Summary judgment here in Cisco’s favor is 4 warranted. 5 6 Failing to comply with the provision in the Agreement requiring Cisco to accept or reject the AMC Siebel Adapter 7 This claim overlaps with the breach of contract claim regarding the Siebel Adapter. “If the 8 9 United States District Court For the Northern District of California 10 2. allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually 11 12 13 14 stated.”113 As a result, to the extent that AMC contends here that Cisco failed to accept or reject the Siebel Adapter in the same way that it asserts Cisco breached the contract by engaging in the same, Cisco is entitled to summary judgment. 15 3. 16 Cisco argues that statements made about Cisco’s intent to transfer customers from the Cisco 17 Making false promises with respect to the development of the Siebel Adapter Siebel Adapter to the AMC Siebel Adapter made before the parties executed the Agreement are not 18 actionable. The court agrees. The implied covenant does not exist prior to the contract, so it does 19 20 not require the parties to “negotiate in good faith prior to any agreement.”114 Thus, statements 21 made only in negotiation, prior to any contract, occurred when no contractual duties existed and 22 therefore cannot form the basis for an implied covenant claim. Once again, summary judgment in 23 Cisco’s favor is warranted. 24 111 Docket No. 134 at 20. 112 See Careau & Co., 222 Cal. App. 3d at 1395. 113 Id. 114 McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2008). 25 26 27 28 20 Case No.: 11-3403 PSG ORDER 1 2 4. 3 Denying AMC the fundamental benefits of the Agreement with respect to the UCCX Connector 4 AMC’s main implied covenant claims center on whether Cisco in bad faith denied AMC 5 6 the opportunity to reap royalty payments, as provided for in the contract, for both the Siebel 7 Adapter and the UCCX Connector. The Agreement provides that Cisco if developed software is 8 accepted, Cisco must pay AMC a set amount to compensate AMC for non-recurring engineering 9 costs, as well as a prepaid royalty amount.115 There is no express obligation for Cisco to market or United States District Court For the Northern District of California 10 sell the products. However, in the event that Cisco did sell the products, Cisco agreed to pay AMC 11 12 additional royalty payments and maintenance fees.116 a. 13 Siebel Adapter AMC argues that Cisco frustrated this possibility of additional payments by completely 14 15 refusing to work with AMC on the Siebel Adapter project. While Cisco again argues that it is not 16 expressly required to provide any additional resources other than those specified in the Agreement, 17 if “cooperation of the other party is necessary for successful performance of an obligation, a 18 promise to give that cooperation… will often be implied.”117 While the express terms do not 19 20 21 require additional resources from Cisco, they do not preclude additional resources. In fact, the Agreement specifically contemplates the possibility that Cisco may provide additional resources: Cisco Property: 4.8.1. During the term of this Agreement, Cisco may provide equipment, designs, materials, software and other property of Cisco, including any and all pre-existing technology of 22 23 24 25 115 See Docket No. 111, Ex. 14 § 3.2, 3.3. 116 See id. § 3.4. 117 1 Witkin, Summary of Cal. Law, Contracts § 798 (10th Ed. 2005). 26 27 28 21 Case No.: 11-3403 PSG ORDER Cisco (collectively “Cisco Property”) to Licensor for its use in fulfilling its obligations hereunder.118 1 2 More fundamentally, though, both parties have presented evidence as to whether Cisco denied 3 basic information necessary to complete the project. For example, AMC submits evidence that it 4 5 needed Cisco’s existing Siebel Driver to make certain technical changes,119 as well as evidence of 6 internal decisions by Cisco to discontinue the project and Cisco’s failure to respond to AMC 7 requests for information. Cisco in turn offers evidence that it sent AMC all necessary information, 8 including a copy of its existing Siebel Driver.120 A reasonable jury could go either way on this 9 United States District Court For the Northern District of California 10 question of whether Cisco frustrated the purpose of the Agreement, which requires that jury and not the undersigned to resolve this issue. 11 b. 12 UCCX Connector AMC also asserts that Cisco violated the implied covenant by not pursuing the UCCX 13 14 Connector project. As established previously, under the Agreement Cisco appears to have had a 15 non-exclusive license to the UCCX Connector, but the parties did not set the project in motion. 16 Unlike the Siebel Adapter, the UCCX was not a Deliverable. Cisco did not contract AMC to 17 develop the UCCX Connector, and so does not have any implied obligations to cooperate with 18 AMC regarding development of the UCCX Connector. AMC suggests that licensing the product, 19 20 standing alone, creates an obligation to sell the product. But this theory of the implied covenant 21 must be rejected because the implied covenant must rest upon “the existence of some specific 22 contractual obligation.”121 This is because the implied covenant is limited to ensuring that the 23 parties receive the benefits of their agreement.122 Merely accepting a non-exclusive license to a 24 25 118 See id. § 4.8. 26 119 See Docket 134, Ex. 6 at 232:13-16; Ex. 1 at 273:13-275:5; Ex. 14 at 73:10-75:21. 27 120 121 See Docket No. 129, Ex. 7 at 161:5-17; Ex. 14 at 266:13-269:18, 273:13-274:2; Ex. 15; Ex. 16. Racine & Laramie, Ltd. v. Dep't of Parks & Recreation, 11 Cal. App. 4th 1026, 1031 (1992). 28 22 Case No.: 11-3403 PSG ORDER 1 product does not give rise to a “specific contractual obligation” to hire AMC to develop a modified 2 version of that product, and then go on to sell that product to others.123 AMC also was free to sell 3 the product to others, differentiating this case from others where a covenant to sell was implied.124 4 Summary judgment in favor of Cisco on this issue is warranted. 5 C. 6 Cisco’s Counterclaims AMC alone moves for summary judgment on Cisco’s counterclaims. Cisco’s first 7 8 9 counterclaim is that AMC breached the contract by (1) failing to deliver the Siebel Adapter and (2) prematurely terminating the Agreement. As to the first ground for breach, as discussed above there United States District Court For the Northern District of California 10 is a disputed issue of material fact of whether AMC delivered the Siebel Adapter. As to the second 11 ground for breach, AMC contends that because Cisco was in breach of the contract, it cannot argue 12 that AMC’s termination was premature. However, as also noted in the above discussion, it is 13 disputed whether Cisco breached the contract. If a jury were to find that Cisco did not breach, it 14 could also find that AMC’s termination was unjustified. Summary judgment is thus improper. 15 As its second counterclaim, Cisco also asserts AMC breached the implied covenant of good 16 17 faith by “failing to dedicate sufficient infrastructure and manpower resources to fulfill its 18 development and testing obligations for the AMC Siebel Adapter pursuant to the terms of the OEM 19 Agreement.”125 Cisco has presented evidence raising at least a disputed issue of fact as to whether 20 21 22 23 24 25 122 See Careau & Co., 222 Cal. App. 3d at 1395. 123 Cf. Locke v. Warner Bros., Inc., 57 Cal. App. 4th 354, 358 (1997) (holding that where Warner Bros. paid Locke for a first look deal whereby Locke was required to submit any movie project to Warner Bros. first before submitting to other studios, and Warner Bros. had accepted Clint Eastwood’s offer to reimburse Warner Bros. so long as it categorically refused all of Locke’s submissions, Warner Bros. breached the implied covenant because it had a express contractual duty to consider Locke’s proposals in good faith). 27 Cf. Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91 (1917) (holding that plaintiff’s “sole compensation for the grant of an exclusive agency is to be one-half of all the profits” resulting from the defendant’s sales, so the defendant had an implied duty to use “best efforts” to create sales). 28 125 26 124 Docket No. 128 at 23. 23 Case No.: 11-3403 PSG ORDER 1 AMC did so. For example, AMC’s own employees admitted to sometimes overcommitting and 2 missing deadlines.126 Additional evidence discussed above supports Cisco’s contention that 3 AMC’s delivery was far from perfect. It would be reasonable, therefore, for a jury to conclude that 4 AMC did not follow the contract in good faith. 5 IV. 6 7 8 9 CONCLUSION AMC’s motion for summary judgment is DENIED. Cisco’s motion for summary judgment is GRANTED as to AMC’s breach of contract claim regarding the UCCX Connector, but DENIED as to the Siebel Adapter. Cisco’s motion for summary judgment as to AMC’s claims for breach of United States District Court For the Northern District of California 10 the implied covenant is GRANTED as to claims based on Cisco’s failure to provide upgrades and 11 release updates to customers, GRANTED as to claims based solely on Cisco’s failure to adhere to 12 the accept-or-reject provision for the Siebel Adapter, GRANTED as to the UCCX Connector, but 13 DENIED as to Cisco’s failure to cooperate on the Siebel Adapter. 14 IT IS SO ORDERED. 15 16 Dated: July 11, 2013 _________________________________ PAUL S. GREWAL United States Magistrate Judge 17 18 19 20 21 22 23 24 25 26 27 126 28 See Docket No. 129, Ex. 6 at 198:9-20, 227:5-13; Ex. 3 at 223:3-224:5; Ex. 5; Ex. 3 at 220:23221:18. 24 Case No.: 11-3403 PSG ORDER

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